EPF rules are changing substantially: How will you be impacted?

For most salaried individuals, the Employees’ Provident Fund (EPF) forms the backbone of their savings needs. The scheme is now undergoing sweeping changes. Apart from recent tweaks in rules, new measures proposed could change the very structure of the EPF. So will the changes enhance the utility of the EPF or leave subscribers handicapped?
Curbs on withdrawal
In the absence of a dependable pension offering, the PF serves as a nest egg for private sector employees. However, with many dipping into their PF kitty much before retirement, it often leaves the subscriber without a vital savings pool in their twilight years. A few years ago, the Employees’ Provident Fund Organisation (EPFO) had ruled that partial early withdrawal would only be permitted on occasions like a child’s marriage, higher education and making a downpayment for a house, subject to certain conditions.
Members are also allowed to withdraw the entire amount and opt for final settlement if they remain unemployed for more than two months. The EPFO has now changed rules for withdrawal in the event of loss of the job. Members will be allowed to withdraw 75% of the accumulated corpus after a month of termination of service. If unemployed for two months, the member will have the option to withdraw the remaining 25% and go for the final settlement.
Financial planners say restrictions on withdrawals will ensure retirement is not compromised. Yet, a certain degree of flexibility must be retained to help those in crisis. Rohit Shah, Founder, Getting You Rich, says, “Many salaried individuals face a money squeeze at certain stages in life. The flexibility to withdraw PF money for key events needs to stay.” However, Suresh Sadagopan, Founder, Ladder 7 Financial Services, disagrees. “EPF is meant to be a retirement vehicle. If too much flexibility is given during the accumulation phase, it will be abused. This will hurt the individual’s retirement phase.”
Source: Economic Times